New Car Supply Growing at Last

New cars are more expensive than ever before by every measure. Much of the problem is simple supply and demand. Dealerships are low on new cars to sell, raising prices for the ones they have in stock. But the supply is finally starting to catch up.

Demand – Prices are Skyrocketing

In raw dollars, the average new car cost $48,301 last month – a fifth straight month of increases and a record high.

Nearly every other factor influencing new car purchases is also working against new car shoppers. Interest rates are rising. Loan standards are growing more strict. Lenders want higher down payments and higher monthly payments — $743 on average in August.

At the average income, Americans would now need to work a record 42.6 weeks to pay off a new car if they had no other expenses. It’s never been this hard to afford a new car.

Supply – Improving, But it Doesn’t Show

The supply side of the problem is beginning to ease. At the end of August, America’s car dealers had 1.23 million new cars in stock, according to Kelley Blue Book parent company Cox Automotive.

The last time the figure was that high? June of 2021.

Supply is almost a third higher than a year before.

But the figure isn’t high enough to bring prices down yet. “Available supply is at its highest level in our data since June 2021,” said Charlie Chesbrough, Cox Automotive senior economist. “Still, it is far below historical levels. Production just cannot catch up to demand yet.”

How high does it need to get to bring prices back down to earth? In August of 2020, dealers held 2.48 million cars for sale. In August of 2019 – the last pre-pandemic year – that number was 3.45 million.

Chip Shortage Still Controlling the Market

What will it take to get inventory back to a normal level?

The end of the ongoing global microchip shortage would bring the biggest change. Analysts say the chip supply is improving in other industries, but it remains low in the automotive sector. Chipmakers are focused on building high-power chips for cell phones and computers. Automakers need low-power chips for simple functions like adjusting cabin temperature.

The chip industry likely won’t focus on those until it has met the need for more profitable high-power chips and has extra capacity.

Some Brands Have It Better Than Others

The news, however, is not the same at every dealership.

Asian non-luxury brands and European luxury brands had the lowest inventories. Non-luxury brands with the lowest inventories were Kia, Toyota, Subaru, Honda, and Hyundai. Luxury brands with the lowest inventories were Land Rover, Lexus, Acura, Porsche, and BMW.

Stellantis brands – Dodge, Ram, and Jeep – had the highest inventories. Luxury brands with high inventories were Volvo, Lincoln, and Jaguar.

Leave a Reply

Your email address will not be published.